Iochuhu on Yazoohu; Govt OPTION is for up to 50%

[Palm]

Not sure why iochuhu is or his credibility, but he's posted on Yazoo that he spoke to a member of management and was told the 50% ownership will be an option to buy UP TO a total of 50% and the cost to them above their allowed 22.5% will be at the same price as the SD partner gets. Would be worth a call to our management contacts to verify.

[petrengr1]

This has been my understanding all along. As I mentioned earlier I do not think the Government will buy the full 27.5% to bring their total ownership up to 50%.

Two years ago the company hinted that the 2.5% Mitsui would get for the first CSP was worth $550 million. I think that was equivalent to about $2.43/MCF. At that price 27.5% would be worth $6 Billion. I doubt that the Government will want to put that much money into the project. They borrowed about $5 Billion but I think they plan to use that for many other things than just buying a portion of Elk/Antelope.

Of course that is just my opinion.

[jft310]

This has been my understanding all along. As I mentioned earlier I do not think the Government will buy the full 27.5% to bring their total ownership up to 50%. Two years ago the company hinted that the 2.5% Mitsui would get for the first CSP was worth $550 million. I think that was equivalent to about $2.43/MCF. At that price 27.5% would be worth $6 Billion. I doubt that the Government will want to put that much money into the project. They borrowed about $5 Billion but I think they plan to use that for many other things than just buying a portion of Elk/Antelope. Of course that is just my opinion.

The PNG govt is cash poor everyone knows that. Many OIl and NG projects are structured with a downpayment and the the balance paid to the seller as the assets are produced. The price per mcf is set but the total dollars received are floating based on future production. This way part of the Chinese money could be used as a downpayment to IOC enough for them to pay their pro rata  share of the start up size and the balance of the China money used for roads, harbors etc as needed. The second IOC sell down with a new partner is where things get interesting. Lots of possibilites here.

This is all possible because Duma will allow Triceratops NG to feed the Gulf LNG project and thus IOC has lots of NG .How much we can debate forever. LOTS seems to work well today.

The key to understand is IOC and the PNG govt need each other. The profit the PNG govt makes off the IOC NG makes the GDP of the country grow quicker and IOC has the fuels they need to drive that growth. These two can grow and mature together and they will.

[Palm]

Agree Pet, this way gives them the flexibility they need on similar terms to Mitsui. In fact they may have come back to IOC at some point saying that they liked the option Mitsui has and would like a similar option, but even more. IOC says sure, but the same terms apply. Whatever we sell to a third party for in a SD in EA sets the price.

We need the NEC approval after which the SD will take place per IOC management. The NEC approval is anticipated to set the refrigeration process IOC will use and the partner can be finalized. Who knows when this all happens?

[Dr. Wu]

Not sure why iochuhu is or his credibility, but he's posted on Yazoo that he spoke to a member of management and was told the 50% ownership will be an option to buy UP TO a total of 50% and the cost to them above their allowed 22.5% will be at the same price as the SD partner gets. Would be worth a call to our management contacts to verify.

I verified with mgmt - it is an option to acquire up to - not an obligation to acquire all of 50%.  I agree with JFT on his view of the govt and IOC needing each other - this has slowly evolved into a partnership, albeit a little bit of a strange one.  Still, if the govt pays a commerical price and one reasonably close to the selldown, we will be happy, along with a happy government - and we must never underestimate the value of a happy government to our future.  O'Neill has a vision for better infrastructure in PNG and this comes with the need for energy independence and supply.  Maybe he picked up a few pointers from the Austrailian 15% LNG model, or maybe as I believe, RDS is still lingering around giving him "constructive advice" - which is perfectly fine.  With respect to that loan, If there is one thing O'Neill understands, its foreign capital flows, and this is something PNG needs desperately.  Like everyone, the Chinese have an agenda - they want and will take some determined amount of gas. O'Neill will count on them (and others) for continued capital for the country in the form of infrastructure and business development.  For us this is good.  We have the resources, success rate, acreage, and knowlege to continue developing gas fields.  Lets not overthink this - we are for better or worse (better for sure), the integrated oil co of PNG.  We can benefit greatly from these relationships  - both as an independent LNG exporter and a commerical partner with the government for internal gas consumption and export.

[Palm]

WA used the terminology the other day of IOC and the government being "fully aligned". Me thinks that's what you're saying good doctor. Oneill is a very smart guy and is politically savvy. If you're going to get things done properly you must use all of your available resources very wisely. So far he's proven himself. Pulling this deal together as well as the financing from China is a major accomplishment. As long as he holds the trust of Parliament and his people he will get many things accomplished. So far so good.

Thanks for the confirm on the option portion of this deal. As you say, if China wants LNG, LNG they'll get. IOC has wisely positioned themselves to benefit from the main Asian LNG players. This will be a velly good thing.

[jft310]

Glen from yahoo says.
The government buys 22,5% at sunk cost (their share probably $ 100 million by now) plus they buy 27,5% at market. Still makes for a very low blended cost. Therefore, they can offer good deals for power plants (which the country badly needs) and petrochemical plants which creates a lot of good jobs over time.

PLUS, IOC on their side of the 50% doesn't have to Carry The Government's share anymore. A win win situation.

Also, to build a 7,6 million ton plant takes 5 years and only 6-8 companies in the world would be big enough to fund that (and fund the government's share too). Now, with a 4 million ton plant initially, which will later be expanded as more gas gets found at Triceratops and other Reefs, the number of companies that can fund that expands exponentially.

Lastly let us not forget that IOC has sold already 3,8 million tons to offtakers, so the whole production is already sold forward and funding thus secured

[Stavros]

If all this is true, then why does IOC Management let the world believe the other dour explanations of the revelation?

It seems to me that IOC should have immediately informed the Market as to the actual details of this new-found alignment with the Government.

It baffles me why they reveal such information to individual members of the public in telephone conversations but they won't hold a public Conference Call or issue a detailed Press Release.

Please help me by contacting IOC and requesting a public airing of the details before the Market opens on Friday morning.

[Tree]

Good morning Stavros,
The Deeeetroit is back in World Series after sweeping the Yanks.
I seriously cannot see where there is a need for IOC to set anything straight. Details are being negotiated apparently with all involved partners a few SMs and a couple of NOCs as far as we know.

You ask: ..."why does IOC Management let the world believe the other dour explanations of the revelation?...IOC should have immediately informed the Market as to the actual details of this new-found alignment with the Government."

What exactly are the dour explanations you need them to clariy?

[Libtardius Maximus]

Good morning Stavros, The Deeeetroit is back in World Series after sweeping the Yanks. I seriously cannot see where there is a need for IOC to set anything straight. Details are being negotiated apparently with all involved partners a few SMs and a couple of NOCs as far as we know. You ask: ..."why does IOC Management let the world believe the other dour explanations of the revelation?...IOC should have immediately informed the Market as to the actual details of this new-found alignment with the Government." What exactly are the dour explanations you need them to clariy?

Tree,

I won't speak for Stavros, but I think what he's saying is clarification on government buying into E/A. The last article written quoting Phil M stated negociations were taking place with PNG Government. It was a three letter acronym, I'm thinking DOM. I cannot find the article but it's in the last 60 days. PNGIndustry news or some such. I'm surprised no one has posted a reprint since I think some of the answers are in the article.

it's the shorts blatant distortion of having to give half the resource to PNG Gov that needs debunking.

Who can find this article?